Survey data shared by TIAA shows more than half of respondents (57%) feel their parents’ financial planning for retirement has impacted their own, with almost half (44%) saying they have avoided taking on significant debt to remain in a better position to provide future assistance.
At the same time, TIAA finds, 38% say they have adopted a more conservative approach to everyday spending, for example by consciously limiting their spending on non-essentials, in order to remain financially able to support their parents in retirement.
Dan Keady, chief financial planning strategist at TIAA, observes that individuals lacking confidence in their parents’ financial security in retirement (27%) are twice as likely to lack confidence in their own retirement as those who are confident in their parents’ (72% versus 36%).
“We’ve seen firsthand what the data shows,” Keady says. “People who are concerned about their parents’ financial well-being in retirement may be sacrificing their quality of life today out of concern for their own financial future.”
The TIAA survey shows that Generation X and Baby Boomers are significantly less optimistic than Millennials about their parents’ financial outlook. Just over one-third of Gen X adults and only one in four Baby Boomers describe their parents’ financial outlook as “very good” or “excellent,” compared to more than half (52%) of Millennials. According to TIAA, the same applies when it comes to confidence in their parents’ current or future financial security in retirement. While nearly half (47%) of Gen X and nearly a third (34%) of Baby Boomers say they are confident in their parents’ current or future financial security, a strong majority of Millennials says this is so (60%).
Keady points out that nearly four in 10 Gen X and Baby Boomers disagree that their parents’ approach to saving and investing “is admirable and one to emulate,” compared to a quarter of Millennials.
Shelly-Ann Eweka, a director of financial planning for TIAA, warns that Millennials’ optimism may be misguided, highlighting need for dialogue. Indeed, the survey results also suggest that the perceptions people have about their parents’ financial plans may not always match reality. Seven in 10 Millennials rate their parents’ financial outlook as good to excellent, yet only half of Gen X and Boomers (i.e., those in their parents’ generation) rate their own financial outlook the same .
Keady and Eweka warn that the confidence that Millennials have about their parents’ finances may actually create a false sense of security, especially when individuals mistakenly believe they will receive an inheritance.
“Open dialogues and a well-planned retirement can help alleviate family stress and may give you permission to live your life without the worry of outliving your savings or becoming a financial burden to others,” Keady says.